4 Ways To Decline A Family Loan

Lending money to family members can put you in a sticky situation. When your loved ones borrow money and don’t pay it back, your relationship can be strained or even ruined. Instead of trying to navigate the tricky waters of lending family members money, take a look at these 4 tactful ways to decline a family loan without hurting anyone’s feelings.

1. Say you don’t have the money

This one can be tricky if you live in a large house and are constantly bragging about how much money something cost you. If you’re that person, you’ve probably got the family loan sharks circling and rightly so.

Family members will often tell you why you should loan them money. They may repeat things back to you that you have mentioned, so be ready. The best tactic is to never brag or gloat about what you have, but if it’s too late, have a ready comeback. Tell them you’re making an investment the next day or that the money is already being put into your child’s college fund. The point is to make them understand that you don’t have money lying around.

2. Empathize and advise

First and foremost, offer empathy for the family member’s situation. If the person asking is a serial borrower, you probably won’t feel bad turning them down. However, if they really are in dire straights, it can be a bit more difficult. Show them a little empathy and then offer some sound advice.

Avoid saying things like, “you should have” and instead say things like, “maybe you should”. Giving someone an action to do will make them feel more in control of the situation and as a bonus it will make it look like you genuinely care, which you probably do if they are your family.

3. Direct them to community resources

Instead of giving them a loan, you can always help them find a community resource that can help them out. There are plenty of government and local programs that can assist with food, heat and other necessities. If the individual has lost their job, there may be community programs at the local library to help them get back into the workforce. Being there for your relative in their time of need is often more appreciated than a loan.

4. Just say no

When all else fails, you may need to just say no. Some people don’t get subtle hints and they will keep pressing the issue. Simply tell them you are not in a position to offer them a loan and leave it at that. They don’t need to know the particulars of your situation if you don’t feel like sharing them, so don’t feel obligated to explain yourself. You can make a suggestion to your family member to take out a payday advance loan instead if they’re really short on cash.

Loaning money to a family member can be a tricky situation. Many times things end badly when loans aren’t paid back promptly or at all. If you do decide to lend a family member money, make sure you have a written contract stipulating when the loan will be paid back.

Anum

Anum Yoon is the founder and editor of Current on Currency. She loves all things personal finance, which is why you'll find her work all over the PF blogosphere.